SpencerBarron.com

“That’s too expensive.”  The words have the sound of an excuse to me.  I would respond better to, “That appears to be an inappropriate purchace considering current trends and the inability of the product to add real value to our enterprise within our time constraints.”  At least it would show me that they thought it through.

Expensive usually means that something costs a lot.  That is a really bad definition.

I remember trying to talk my parents into buying me a pair of Nike shoes way back when. All they saw was the cost.  I saw opportunity.  The Nike shoes would obviously make me run faster, jump higher and inevitably propel me into an improved social circle.  Certainly the $50 price tag might have seemed a little pricey to the untrained observer but as any ten year old could tell you, sometimes you need to “just do it.”

Most children can see the big picture.  They see the benefits the product brings to the table at least in terms of the instant gratification they’ll get.  They understand how the product will affect the complex social interactions of junior high and why they need to have it now before it is too late.  By the time they turn into full grown business managers though, they’ve lost their vision.  Adults slowly beat it into your mind that price is the most important thing.  “How much money will the purchase take out of your pocket?”

I try to think of it differently.  “How much money will the purchase put in my pocket.”

If I spend $200 on marketing that doesn’t bring me any business.   That’s expensive.

If I spend $20,000 on marketing that makes my phone ring off the hook, marketing that nets me $100,000 or more, that’s not expensive, that’s shrewd business.  A great deal.

Somewhere along the line you need to make assumptions and projections in order to determine if there is going to be a benefit that is worth your investment.  Return on investment (ROI) is only a certainty after the fact.  There is no certainty but if you can find that childlike vision you used to have, maybe you can get past the price and look for the benefits.

Greg over at Blueroof.com did,

Instead of creating well-designed websites that offer real value to the consumer, agents usually either get a cheap  template just to have a website or they pay a technology company (Trulia/Realtor.com/Zillow) for leads. I understand why- it’s a lot easier and much less expensive to build a custom site. Custom websites can cost a lot. I spent well over six figures on BlueRoof.com, and it’s tough to pay that kind of money, especially if you have no experience converting online leads and have no idea what sort of return (if any) on your investment you’ll get. But help is on the way.

… I closed over 100 homes in 2007 from buyers and sellers we met through my website (of course I have a team of buyer’s agent also). These consumers all felt as though they were given value on the website and they used the website and contacted us because of it. If you want a better brand of business and want to build your team and business in 2008, stay tuned in January- when I discuss a new system that I think will offer more value for agents, and more value for the consumer. - Greg at Blueroof.com

That sounds like a deal to me.  I look forward to seeing what’s in store.

Have agents made so much money in the past that they need not be concerned with details?  Most of the ancillary services offered to Realtors have a common thread.  Good enough is good enough. 

• Websites don’t need to look good, you just need to have one.  “Get a template.”
• Standardized direct mail marketing.  Hey we all say the same thing right?  “Don’t forget to put your picture on it.”
• Lead providers that still collect names in popups online then sell it to Realtors for hundreds of  dollars.  “Hey you only need one right?”
• Newspaper advertising that marks the prices up for a Realtor ad.  “You have the money.”
• The showing service that is inadvertantly rude to my clients and other agents.  “They’re really busy.”

That’s just the short and local list.  The local Realtor associations push their poor quality products down your throat with little or no choice for alternatives.  The Denver MLS that we pay for by the minute is incredibly slow.  Realtor.com,  … I think that says enough.  When will there be actual quality services for real estate professionals that just want to focus on their business?

$1 dollar.  That should get the ball rolling.  I wonder how often marketers abstractly anchor us at a higher price even though they know they can accept much less.

A while back I had a discussion about pricing over on the Sellsius blog.  The author suggested that you could get a better price by not actually anchoring the final value by putting a list price on the home.  Let the market determine the price.  In our discussion in the comments, he pointed out a study that he says supports his approach.  I disagree with the 1$ listing as much as I disagree with range pricing, but the study is actually a good one.

It shows how much people are influenced by arbitrary factors when deciding what they would be willing to pay.  If I read it right, arbitrary factors would include something as meaningless as a suggested retail price. 

I noticed that many builders have inflated their abstract pricing on their inventory in order to offer better incentives and offer ‘dramatic’ price cuts so that buyers feel like their getting great deals when they buy a new home.

 I recently sold a home in the Village at Centennial  near the Denver Tech Center where the builder was offering the same home at $505,000 even though they hadn’t sold a home like it for more than $450,000.   In fact, the majority of the similar home sales were around $425-$440k.  This method has helped the builders maintain their net in the face of foreclosures appearing on the market.  In fact, it actually helps keep the lenders from pricing their homes to low.  The BPO (Broker Price Opinions) usually include price of homes that are currently for sale.  So even though the foreclosed homes are trashed out, they are priced just under what  the builder will accept new.  And of course, the buyers leave like they’re getting a great deal.

I talked to the sales rep in the office about their current inventory and he admitted that he had the ability to move as much as 15% off of the list price depending on the ‘read’ he got off of the customer.  That’s the sort of thing that doesn’t bode well for the current homeowners that may have paid too much.  Especially when they get in a need to sell situation like a job change.  It also tells me that most unrepresented buyers are like deer in headlights when they walk into the sales office.

Funny part is, most buyers still fall for the ‘base price’ system where they hook you with a lower price while showing you a better product in the model.  They then either raise the price or act like their giving you a deal by offering you incentives in upgrades. 

When a builder is offering $50,000 in upgrades, it makes you wonder, how did they arrive at that number?